Monday, March 21, 2011

There never was a housing bubble!

For five years, I have been trying to publicly warn people about the housing bubble. Unfortunately, I was wrong all along. There never was a housing bubble. I apologize for the error.

You might think I'm being sarcastic, but I'm not. You see, the belief in a housing bubble rests on housing prices substantially outpacing inflation. If housing prices don't outpace inflation, there can be no bubble. I foolishly assumed that I could trust the inflation numbers published by the U.S. Bureau of Labor Statistics. I have been informed that doing so is pure ignorance.

I admit was wrong. The army of economists crunching the inflation numbers at the BLS are just tools of a corrupt and wicked government. The true inflation numbers come from a guy with no graduate degree in economics who is chief economist at the Shadow Stats website. He sells the true numbers for $175 per year. You know he's not a snake oil salesman or a con artist because he tells you what you already believe. Con artists would never do that. This guy says the government is under-reporting the real inflation numbers. The real inflation numbers are much higher, and have been for decades.

If the true inflation numbers are much higher, then inflation-adjusted housing prices must therefore be much lower. It's a simple rule: higher inflation = lower inflation-adjusted housing prices = much smaller or non-existent housing bubble.

For example, in 2001 when I first spotted what I thought was a housing bubble (silly me), nominal home prices had increased about 8.5% from the year before. But, according to Shadow Stats, inflation was 9.1%. Real home prices actually fell 0.6% that year! What a fool I was for thinking housing prices were rising too fast. They were actually falling!

If the Shadow Stats inflation numbers are right, then home prices must now be deeply undervalued. I say buy, buy, buy!

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